Ford retains Mulally through 2014, continues CEO search

Deepa Seetharaman, Paul Lienert

5 Min Read

(Reuters) - Ford Motor Co (F.N) said Alan Mulally has agreed to stay on as chief executive for at least two more years, giving the No. 2 U.S. automaker more time to gauge potential successors — or keep Mulally on longer if needed.

Alan Mulally, President and CEO of Ford Motor Company attends a launch event for the New 2013 Ford Fusion Hybrid car in New York's Times Square, September 18, 2012. REUTERS/Mike Segar

Mark Fields, a 23-year Ford veteran seen as the front runner to succeed Mulally, was promoted to chief operating officer as part of several top management changes on Thursday. But Ford stopped short of formally anointing Fields, 51, as its next CEO.

The new timetable keeps Mulally, 67, in place for at least one year beyond what analysts expected. Chairman Bill Ford also said Mulally could stay longer and left open the possibility that Ford eventually could hire an outsider to fill the role.

“I’d like him to stay forever, but part of being a great CEO is also developing a great team,” Bill Ford said during a conference call. “We really do have a great team that Alan has developed and mentored, and he’ll continue to do that.”

The announcement raises questions about the board’s confidence that Fields or others within Ford can lead the automaker at a time when it is overhauling its struggling European operations and building up its fledgling China business.

Both Bill Ford and Mulally said the next two years will offer the company a chance to further develop and strengthen its management team. Fields, who has led North and South America for seven years, will assume day-to-day responsibility for global operations.

Ford also promoted several other executives Thursday, including Joe Hinrichs, who will take on Fields’ current role as head of the Americas. Hinrichs, seen as a potential candidate for CEO, now leads Ford’s operations in Asia and Africa.

“Today is really about developing the individuals, but also about developing the team,” Mulally said during the conference call. “Mark is getting a chance to develop and serve as COO.”

‘I’M NOT GOING ANYWHERE’

As COO, Fields will lead the weekly business review meetings that have been one the most visible signs of cultural change at Ford since Mulally was hired in 2006.

“I’m going to step back from that and focus on supporting Mark,” Mulally said. “And I’ll be there; I’m not going anywhere. I’ll be there with him and supporting him.”

The management changes, approved by Ford’s board on October 19, are all effective on December 1.

Naming Mulally’s successor is crucial for Ford because he is closely identified with the automaker’s rebound and its success in avoiding the federal bailouts that rescued its U.S. rivals, General Motors Co (GM.N) and Chrysler Group LLC FIA.MI, in 2009.

Under Mulally, the culture has become more open, a reversal from the automaker’s previous culture of “empire building and back-biting,” Bill Ford said. Mulally’s “One Ford” strategy, which centers on connecting Ford’s once-disconnected business units to achieve economies of scale, has allowed the automaker cut costs and boost profits.

Bill Ford did not rule out the possibility of hiring an outsider, as he did when he hired Mulally, then an executive at Boeing Co (BA.N), to steer Ford’s turnaround six years ago.

But he added: “I think I’d be surprised if we didn’t have the next CEO come from inside.”

CEO SPOT ‘UP FOR GRABS’

Morgan Stanley analyst Adam Jonas said Mulally’s extended timeframe as well as other management overhaul made Ford’s succession plan “far less obvious today.”

“The next Ford CEO is truly up for grabs,” Jonas said in a note. “We believe Ford is keeping its options open to consider several talented managers in the organization to eventually take the wheel from Alan ... not just Mark Fields.”

Hinrichs’ current position will be split in half, with Ford of Europe chief Stephen Odell taking on Africa and David Schoch, now head of Ford of China, leading Asia Pacific operations.

Odell will also add the Middle East to his responsibilities, which include overseeing Ford’s restructuring in Europe, where the automaker is expected to lose at least $3 billion over the next two years due to the economic downturn in the region.

Jim Farley, the global head of marketing, will now add responsibility for the Lincoln brand. John Lawler, current chief financial officer of Asia Pacific and African operations, will become CEO of Ford China.

Bill Ford said that Fields has grown in his role over the last seven years, pointing to this week’s third-quarter earnings report as proof. Ford had a record 12-percent operating margin in North America in the third quarter.

“I put Mark into that job seven years ago,” Bill Ford said. “The growth that we’ve all seen in him over that period is remarkable. Alan has done a tremendous job of mentoring Mark.”